Question
Facts : On April 1, 2020, Foster Company purchased used equipment. The company recorded the cost of the equipment as $66,000. The company expected the
Facts: On April 1, 2020, Foster Company purchased used equipment. The company recorded the cost of the equipment as $66,000. The company expected the equipment to last four years or 8,000 hours, with an estimated salvage value of $6,000 at the end of the useful life. The equipment was used 500 hours during 2020.
1. What amount of depreciation expense will Foster Company record in 2020 using the straight-line method of depreciation? Show your calculations.
2. What amount of depreciation expense will Foster Company record in 2020 using the units-of-activity method of depreciation? Show your calculations.
3. After reviewing Foster Company's records, regulators discover that the company improperly capitalized $10,000 of revenue expenditures in determining the cost of its equipment. Explain how Foster's error affects the company's financial statements if Foster uses straight-line depreciation
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